Ben Bernanke's reappointment

The very model of a modern central banker

An academic background stood the chairman of the Federal Reserve in good stead during his first term. Political skills may be more important in his second

AS THE financial crisis gathered force in August 2007, Jim Cramer, a hyperbolic market commentator on cable television, hurled the worst epithet he could muster at the chairman of the Federal Reserve: “Bernanke is being an academic. It is no time to be an academic!” By August 25th this year, when Barack Obama nominated Ben Bernanke to a second, four-year term, what had once been an epithet had become a source of strength. “As an expert on the causes of the Great Depression, I’m sure Ben never imagined that he would be part of a team responsible for preventing another,” Mr Obama said. “But because of his background, his temperament, his courage, and his creativity, that’s exactly what he has helped to achieve.”

It is too soon to declare that the threat of depression has passed, but not to conclude that Mr Bernanke’s academic background, which seemed a liability at the start of his tenure, has proved his greatest asset. His so far successful handling of the crisis reflects not just what he learned about the Depression, but what other economists have learned from studying crises—as demonstrated by the similar strategies other central banks have taken. A political neophyte compared with his predecessor, Alan Greenspan, Mr Bernanke made that a strength when he pleaded with politicians to bail out the system. “I’m a college professor,” he told Congress as it debated the $700 billion Troubled Asset Relief Programme. “I never worked on Wall Street… My interest is solely for the strength and the recovery of the US economy.”

Difficult as Mr Bernanke’s first term was, his next will be more politically treacherous. The recovery now under way will be feeble: deflation will remain a bigger threat than inflation for at least a year. Yet early signs of growth will generate pressure to tighten monetary policy which Mr Bernanke must beat back without seeming soft on inflation.

Once the recovery is entrenched and unemployment is falling, he will have to raise interest rates and shrink the Fed’s balance-sheet, inviting attack from Congress and perhaps Mr Obama. He will also have to create a new monetary regime to replace the single-minded focus on low inflation, says David Blanchflower, who recently quit the Bank of England’s monetary policy committee. The Fed may have to intervene in markets more to prevent new bubbles. But that, like tightening monetary policy, is unpopular and the Fed is already in bad odour with the public (see chart).

Still, Mr Bernanke is probably up to these challenges. Mr Obama has strengthened him immensely, by nominating the 55-year-old Republican long before his term expires rather than leaving him dangling or replacing him with a Democrat. More important, Mr Bernanke has shown he can adapt academic theory to the political reality in which the Fed operates.

This was not a foregone conclusion. Mr Bernanke was appointed to the Fed in 2006 largely on his academic credentials. As a professor at Princeton University, then a Fed governor under Mr Greenspan and briefly an adviser to George Bush, he helped build the edifice of macroeconomic orthodoxy that has proven so badly flawed. He argued that central banks performed best by concentrating solely on inflation, preferably with a target. To an even greater degree than Mr Greenspan, he was sure that using monetary policy to try to stop asset-price bubbles would do more harm than good.

To a great extent this reflected his and most macroeconomists’ assumption that markets were, most of the time, rational and efficient. In September 2005, he declared: “Recent house price increases are attributable mainly to economic fundamentals.” Jeremy Grantham, a fund manager, has said Mr Bernanke’s faith in efficient markets was so strong that he could not see a once-in-a-century bubble in home prices because such a bubble wasn’t supposed to be possible. Mr Greenspan is blamed for planting the seeds of the crisis by holding interest rates low after the 2001 recession, but Mr Bernanke provided ample intellectual cover for the strategy. As late as August 7th 2007, days before the crisis erupted, the Fed said it was more worried about inflation than about a weakening economy.

But once the gravity of the crisis became clear, Mr Bernanke knew what he had to do. Financial institutions, unsure who was fatally exposed to toxic securities, began to hoard liquidity (cash and super-safe government debt) and withhold credit from each other. As liquidity dried up, some institutions failed and others reduced their lending to businesses and households, starving the broader economy. When everyone wants liquidity, only the central bank can supply more. Over the next 20 months, Mr Bernanke employed ever more creative means to inject liquidity into the financial markets. He also used conventional monetary policy, eventually cutting short-term interest rates close to zero and attempting to lower long-term interest rates by purchasing bonds. But the Fed needed a functioning financial system to transmit the benefits of such actions to the broader economy.

He was not the only central banker to come to this realisation, or even the first. When the crisis first broke in August 2007, the European Central Bank (ECB) was more aggressive in its initial response, providing at first unlimited cash to euro-zone banks. Similarly, the Fed’s decision to throw its weight behind Bear Stearns, American International Group and Citigroup, had its analogues abroad: the Bank of England provided a lifeline for Northern Rock and the Swiss National Bank later backstopped UBS. All central bankers, not just those who are authorities on the Depression, know that in a crisis, the failure of a single financial firm can trigger contagion and the collapse of its counterparties, endangering the entire financial system and economy.

But Mr Bernanke not only acted more quickly and forcefully, he faced unique constraints. Almost by accident the ECB ended up with a modern toolkit: it can lend to far more counterparties against far more types of collateral than the Fed. Europe’s economy remains bank-dominated. America’s once was, too, and the Fed’s tools reflect that: it can ordinarily lend only to banks from its discount window. But America’s economy is now dominated by a shadow banking system of investment banks, financial firms and investment funds. Mr Bernanke’s staff devoted much of their creativity to overcoming the legal and technical barriers of the Fed’s 20th-century charter and, when they hit the limit, convincing Congress and the administration to pick up the baton.

Professional economists have applauded Mr Bernanke’s actions, but the public has not. The Fed’s approval rating stands at just 30%, lower than any other federal agency and down from 53% in 2003, according to Gallup. Partly this is because the economy has faced a devastating recession that the Fed was meant to prevent. But it also reflects discomfort with the Fed’s meddling in private markets.

Central bankers expect to be unpopular, but the Fed is uniquely vulnerable now. A bill in Congress would subject its most sensitive decisions to legislators’ scrutiny, while the administration has proposed expanding its regulatory oversight to contain future crises. This has thrust Mr Bernanke into the political arena: he appears to be at odds with Tim Geithner, the treasury secretary and a former colleague at the Fed, over his proposal to strip the central bank of its consumer-protection duties. Just one senator voted against his confirmation in 2006; between 10 and 25 from both parties may this time, though that will not deny him confirmation.

Mr Obama could have succumbed to partisan priorities as well. The Fed chairman wields enormous influence over all economic policy, not just monetary policy, and a Democrat has not held the job since 1987. Mr Obama had many qualified candidates, from Larry Summers, his adviser and a former treasury secretary, to Janet Yellen, president of the San Francisco Fed. The president went with Mr Bernanke to keep together two principal architects of the response to the crisis—the other is Mr Geithner—and to eliminate market suspicions that he wanted a pliable loyalist in the job. In doing so, he has helped assure Mr Bernanke’s legacy of making the chairmanship less political and more technical. You might even say academic.

Modern Survivalism Tenet Number Five
Food stored is an exceptional investment. You simply can’t lose by storing additional food that you use on a regular basis

by Jack Spirko

Food is increasing in cost faster than just about any investment right now and certainly faster than the rate of inflation. It seems the media has become fascinated with people practicing the modern survival philosophy. Indeed I would say that disaster prep has become one of the topics de jour at the moment. As always though mainstream media is myopic and focused on one and only one segment of modern survivalism and for now it seems to be those who store food.

As the host of the survival podcast I have been approached by a lot of media lately and recently was approached by a producer from "The Today Show" about helping them with a segment. When the producer stated to me, "well we have already filmed one family and they had a huge pantry, I got what I needed from them," I was done and politely choose not to be involved. A few weeks later the actual piece aired and after viewing it I am very glad that my name and brand will never be associated with it, you can view the segment on the NBC Website here. Make sure to watch the end when they sample a bit of the poppy seed cake.

One thing you never hear mentioned in any of these media segments about preppers storing food is the investment value the food represents in today's marketplace. In a recent LA Times Article a simple list of foods used in most American homes posted an 11% return on 16 common grocery items between 2007 and 2008. This trend of rising food prices has continued at the consumer level right on into 2009 despite drops in other commodities like oil. Compare that to the performance of stocks, mutual funds and other common investments from 2007–2009.

The key with storing food is you don't run out and just buy 50 cases of military style rations and put them away for a decade in a basement. Instead modern survival philosophy revolves around the mantra of "eat what you store and store what you eat." When you follow that concept you soon realize that storing food for the most part doesn't cost a dime more then you will spend anyway.

Food Storage Rule One – Store What You Eat

Follow the simple logic that if you primarily store food items that you use everyday in your home that every dollar you spend was going to be spent anyway. Those six jars of spaghetti sauce you buy today would have still been purchased just over a few months rather then in one day. Keep in mind that when you go to the grocery store just about anything in the center of the store is storable. Most common food items we purchase today have shelf lives of at least 6 months and by making sure you check dates you can almost always find stuff that will easily go a year. Check in the back of the row for the items that were most recently stocked; sometimes this little trick adds 3–6 months of shelf life if new product was just brought in.

When you store what you eat you are not only spending money you will spend sooner of later, you actually spend less of it in total. How? You mitigate inflation. Buy a year's worth of an item today and six months later go see what the price of the item is, you are now eating that item and you have cheated the inflation. When I explain this to people the common objection is that "sure but sooner or later I have to buy more of it and at that point I pay the higher price." This is true and note I said you "mitigate inflation" not eliminate it. What you didn't pay was all the higher prices during the inflation curve. That may sound complex but it is a simple and proven business principle; it is exactly what Southwest Airlines does with fuel purchases and it is a huge reason why they stayed profitable even when much of the airline industry tanked.

Food Storage Rule Two – Take Advantage of Opportunity Buys

This concept is why you can win big beyond beating a portion of the inflation curve. It is also a two-pronged strategy. Prong one of it is during the build-up phase and simply involves watching for sales and quantity discounts. This concept has been discussed at length in just about every article ever written about the concepts of "thrift" and trimming family budgets so I won't belabor it now. Just understand that by watching for sales you can speed up the cost-effective aspect of getting at least a few months of reserves into your storage program.

Prong two of this concept comes into effect pretty much around the time you get to a 90-day sustainability point in your storage program. While long-term I think you should strive for six months and a year is certainly not overkill, 90 days is a huge accomplishment and it will get most people through 90 percent of the disasters we are most likely to face. Something almost magical will happen at this point though if you are truly "storing what you eat and eating what you store," you will find an ability to take the "opportunity buy" to a new level.

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The way it works is choosing what you don't buy. Sound confusing? It isn't, in reality it is extremely simple. During any given 12-week interval you will find that for at least one week almost every common item in your pantry will go on sale. In most instances they will go on sale 2 or 3 times. Over a few months you will identify a few items that just never seem to go on sale and you will simply have to buy those as needed. For everything else though all you do is don't buy them when they are not on sale or if you are into coupons you don't buy them unless you have a coupon.

Now look, I am not talking about being "cheap" here or scraping by like a pauper. I am simply stating what should be obvious if we didn't look at stored food as being something sensational. When you have 90 days worth of an item in you home, you don't need to buy any more of it for 90 days. Now you don't want to run out, so you will have to buy more at some point. What you can do differently then the typical consumer though at this point is wait until the item is on sale, you find a quantity discount or you have a coupon for it before you buy it again. Just by doing this you will end up with a natural rotation of your stored food. In doing so you won't end up with a closet full of items that are all about to expire next month and need to be donated to a homeless shelter.

Food Storage Rule Three – Integrate Long-Term Items as Extenders/Adjuncts

When I speak about "storing what you eat and eating what you store" I am often asked if that means that you don't also store very long-term storage items, the answer is a definitive no. It is simply the case that a solid 60–90 days worth of stored everyday goods will be easier to acquire (or sell a spouse on acquiring) and provide more day to day utility then a case of military style rations and six buckets of wheat, beans and rice. Once you have 60–90 days of sustainability it is time to begin thinking a bit more long-term. As you acquire commercially produced storables you should seek ways to use these items from time to time as either main courses or at least adjuncts in your day-to-day meals.

The beauty of a hybrid approach to food storage is instead of say buying up a bunch of things you will only eat if you are forced to and then stocking six months worth of it somewhere in your home you can slowly over time get to a ratio of about 60% everyday goods and 40% long-term storage. With this ratio by the time you reach six months of sustainability you would have 4 months worth of everyday goods and 2 months worth of extreme long-term storage goods. A home pantry made up of such a ratio has a massive amount of utility, portability and adaptability to a variety of emergency situations. Additionally those who wish to stock up to a full year’s worth of food will often find it almost impossible to do so without some of these items making up a portion of their supplies.

For simplicity in my lectures I divide long-term storables up into two primary categories. While there are many more ways to divide and think about long-term storage this approach is a practical way for people to do the most important thing, get the food stored for the future. The first classification is what I refer to en mass as "commercially prepared storables," these include the infamous MREs (meals ready to eat) that our soldiers rely on for field rations and the far more useful products built specifically for the preparedness industry. MREs are another subject the semi-informed media at once associates with modern survivalists. They always seem to picture us sitting on a thousand cases of the dreadful things in some dark bunker, chewing on some beef jerky and waiting for the black helicopters to show up.

The reality is while a few MREs never hurt to have around or specifically to have in a BOB (bug out bag), for long-term storage you will be a lot better served by the great products from companies like Mountain House, Provident Pantry and Yoder's Meats. These items are available from companies like Ready Made Resources and Safecastle Royal and provide you two primary benefits. First they have extreme storage life well into and over 10 years in the right environments. Second and just as important is they are actually very good food from a taste and usability stand point. I can't overstate how important it is for you to ensure that any of the commercial long-term goods you choose to rely on are something you will actually enjoy eating. For this reason I recommend purchasing a few cans of a few varieties and using them in preparing meals right away. Then over time acquire a supply of the ones that you and your family enjoy. That may sound really obvious but if I had a silver dollar for every person that told me they had "X number of cases stored of items they have never tasted," I would be a very wealthy man.

The second main category of long-term storables are items with huge storage life that you can acquire and store simply in containers like sealed 5-gallon buckets. The primary ones are rice, beans and wheat. This is another area where I have seen my fellow preppers "go off the deep end" and stock some ridiculous quantity at the expense of more practical goods. We have to understand that as preppers we have two primary finite resources, one is money and the other is space. While grains can help us manage our financial limitations they can also when relied on to excess consume our spatial resources beyond what is practical.

Food Storage Rule Four – Become a Producer

In becoming a producer you kick your food storage program into overdrive. There are really two main aspects when it comes to producing vs. simply consuming in regard to stored food. The first and the one most people think of when I say "become a producer" is various methods of growing your own food, foraging wild edibles, maintaining small livestock and perhaps hunting and fishing. Each of these takes upon a level of production vs. consumer-level activity. When properly leveraged they take your efforts beyond what a finite concept like storage can ever do alone.

Of them all hunting and fishing are the most limited. I enjoy both of these sports and see them as a great way to add protein to my home without a trip to the grocery store. However, when we honestly assess them for use in a true disaster scenario we have to accept that we are not going to be the only ones that see wild game as a source of food. In a true long-term disaster game and fish will quickly become scarce, in a personal level disaster we still have seasons, limits and access to contend with. Hence when it comes to wild game your best use of them is in preserving them via canning, drying, etc. (which is part of the second aspect of production).

Moving on to foraging, this is a slightly improved upon method of production. The chief advantage is that you don't really put any work into cultivation, planting and weeding – you simply harvest wild edibles like blueberries, blackberries, miner's lettuce and countless other sources of wild food. There are some commonalties though when it comes to forage with harvesting game. You also have seasons, in this case seasons when the items are available. You won't find beechnuts in March or blueberries in October. You also need access to wild areas where the items are available and once again in a long-term disaster these items will quickly come under pressure as more and more people have to rely on them. Hence again they are best as adjuncts and will do the most good if you utilize methods of preserving them when they are most abundant.

The final methods of direct production revolve around planting gardens, permanent crops (like nut trees, grape vines, fruit trees, etc.) and keeping various forms of livestock. Going deeply into any of these is beyond the scope of this article but suffice to say by practicing seed saving, breeding, etc. these options can represent wholly renewable sources of food. This can include things like your annual apple harvest, eggs from chickens, meat from rabbits, salad greens (often in all seasons) and other options like cheese from fresh milk or even making wine or mead from grapes or honey if you keep bees. When you add even a small amount of gardening, permanent crops or livestock to a well-stocked pantry it greatly extends sustainability and independence. It also compensates for the simple fact that total storage capacity is finite.

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The second aspect of being a producer rests upon being a producer of storable items no matter how your possession of them originates. In other words if you grow peppers and dehydrate them or if you buy a bulk deal on beef and can it with a pressure canner doesn't matter, either way you are taking on some aspect of production. When you take on the production role of preservation you give yourself options and resource unavailable to the standard consumer. Say you visit a Farmer's Market during heavy harvest and find a great deal on beans. The consumer eats a few meals for a low cost while the harvest is in peak. The producer that cans or dehydrates can buy a large quantity and preserve them for well over a year for a fraction of the cost of a prepared storable item and at a much better quality as well. Additionally he supports local agriculture and trust me, that farmer you buy from today, is an ally you want if we ever have a food shortage.

There are many methods of preservation we have lost touch with that have been used a great deal over the years. These methods were quite common right up until we had a freezer and a refrigerator in every home. To truly increase your independence and preparations there are a few you should consider. These include root cellaring, canning, dehydration, salting, fermentation, smoking and pickling. If you take the time to slowly develop the resources and skills to use a few of or even all of these methods you will reach a level of self-sufficiency that most modern Americans can no longer even conceive of.

Conclusion – Seek a Holistic Solution Not Magic Bullets

If you think about these four rules as a single process you begin to quickly see how each supports and improves the results of the other. By combining opportunity buying with a method of preservation, you do more for your stability then either could do alone. By purchasing commercial long-term storables that provide quality protein and growing high-quality vegetables in a garden each provides more adaptability to the other. In time with patience and dedication each rule changes the way you think and you soon find yourself empowered. Food storage is not a fear-based activity as it is often painted by the media. Done with rational logic and a well-crafted plan it doesn't appease fear, it abolishes fear and frees you from the gerbil wheel that most Americans call the economy.

A food storage plan based on the four rules is extremely robust and flexible. If any one component fails or falls short during a disaster the others can compensate for it. If a disaster becomes extreme in duration your production capacity allows you to sustain what a finite storage supply can never accommodate. On the other hand your stored reserves give you the critical time to ramp up production without an immediate need that is impossible to meet with pure agriculture, foraging and livestock from a standing start. In short when you have food getting more is relatively easy, when you are out of food finding enough to survive on is very difficult.

Today a person that practices these rules is often referred by names such as "survivalist" or "extremist" or even perhaps they are called an "alarmist." Yet it was only a century ago that such people were simply called Americans. These people were your grandparents and your great grandparents and we can learn a lot from how they lived when putting food on the table involved more then a trip to the drive-through. By practicing the common sense wisdom they left for us, we can live a better life today, if times get tough or even if they don't.

Modern Survivalism Tenet Number Four
Taxation is theft, the best way to combat it is to understand every legal deduction you can take or create

by Jack Spirko

Let me be clear about two very important things before I continue in this article.

1. This is not going to be anything about how personal income tax is unconstitutional. While I actually believe it is, right now if you don’t pay it you get in a lot of trouble, you must pay all your legal tax obligations.

2. I am not a tax expert or a financial adviser. This article is more about exactly how to think about taxes then the specifics of how to reduce them.

Cutting to the chase on this let me say when it comes to income taxes you should either learn the system or hire a damn good accountant to work the system for you.

The bigger issue is, why exactly is minimizing all taxation a “survivalist topic”? I know it doesn’t sound like typical survivalism, but it is a fundamental part of my 10-part modern survival philosophy for a very good reason. Survivalists are not the people living in bunkers that the media makes them out to be. Above all their primary goals revolve around self-sufficiency. When you pay taxes there are two factors at play that reduce your self-sufficiency and in fact increase dependency upon government.

The first one is really easy to understand. While you are working on developing a self-sufficient lifestyle in today’s world you need money. Unless you plan on living on the street there is just no way around this. Hence you probably work for a living, be it as an employee or an entrepreneur matters not, you do work and in return you get money. Each dollar earned can then be leveraged to improve your self-sufficiency, get rid of or avoid debt, purchase long-term assets, etc. Hence, every dollar you must then pay as tax is no longer available to you. Again this factor is very easy to understand and most people snap right to it.

The second method of increased dependency is far more insidious and many fail to grasp it at least at first. When a government (federal, state, local) taxes you in any way, shape or form it isn’t just money you don’t have any more. No, at this point it becomes money that is actually used against you in the form of all those wonderful “government programs.” Your income tax is going to fund federal subsidies and your property tax to fund schools with 50% failure rates.

Of course that is only the beginning; governments seem to weave never-ending webs of tax traps once the first nickel goes into the system. Taxes paid to your state are used to build roads. Of course you then have to pay a toll to drive on the roads you already paid for. Those tolls then further empower government and fund more “safety programs” like installing red light cameras which provide more money for more programs. No matter what form taxation takes it always has this double-pronged attack behind it and creates even more taxes and fees.

This is why you should be looking to avoid any form of taxation by any legal means you can find. Hence, I am not only talking about good accounting practices with your income tax. I am going so far as to suggest you avoid things like “sin taxes.” For example, if you drink beer or if you smoke you are paying a lot of sin taxes every time you pop a top or light up. Many survivalists are making their own beers, wines and even growing tobacco. My thoughts on this are, why not, in fact I am a home brewer myself. These practices are perfectly legal and funnel money back to you rather than into the tax system. This approach addresses both sides of the problem all while directly increasing your self-sufficiency.

Another often overlooked method of perfectly legal tax avoidance is purchasing items online or used. This practice will quite often avoid state sales tax. In my home state of Texas sales tax is generally about 8% once the local and city portions are added in. This means when I go spend 300 dollars to buy an item locally I am not just spending an extra 27-dollars. I am also providing 27-dollars in funding for programs I really don’t want. Hence even if I paid the same 27-dollars for shipping and purchased the item online, I reduce my contribution to my overlords down at the state capital. Better yet I can buy the item secondhand, save money, keep the funds in my local community and still avoid funding Rick Perry’s upgrades to the Texas Governor’s Mansion.

Long term believe it or not many survivalists actually will voluntarily reduce their incomes. Some directly while others will use a more creative means, like setting up a nonprofit to dispose of their incomes via causes they actually want to support. In other words they will support a local group that provides useful training with their surplus income rather then provide tax gifts to people on welfare.

This is one of the more difficult nuts to crack from the modern survival philosophy. The key is just starting to actually think about how many times every single day you personally empower government. Fill up your car, flip a light switch, have a cold one, buy flowers for your wife, super size a #3 at McDonald’s or make a phone call and money flows directly into the coffers of our government masters. Really think about that and you begin to understand how taxes and debt have transformed America from what was the most free nation in the world into a group of fairly well cared for slaves. Why do you think President Bush said to be patriotic and “go shopping” right after 9-11?

I for one have had enough! Every time I think about spending a dollar I ask simply, is there a way to do this without contributing to the pension funds of our lofty government masters. Many times there isn’t, but when there is I take the opportunity to avoid empowering the very systems I oppose. Further when I do have to contribute out of necessity I make sure the purchase is part of my long-term plan for total self-sufficiency. My advice, ask yourself the same questions and I promise you creativity and self-sufficiency will be the result.

Modern Slavery Comes to Kansas

Workers who were exploited abroad tend to be exploited here.

• By THOMAS FRANK

Prairie Village, Kan.

Back in grade school our teachers would take us to the statehouse in Topeka, Kan., and maneuver us in front of John Steuart Curry's terrifying mural of John Brown, trying to make abolitionism seem fresh and vivid. But we were children of the 1970s and knew that slavery was a brutish subject from long ago. This was the modern world. If we thought about such things at all, we understood that the concerns of our time were matters like inflation and the Problem of Conformity.

Over the intervening years, however, bonded labor has made a comeback, spotted by journalists in places like Saipan. And now it has apparently come all the way home, from the exotic periphery to the beige office building you pass every day in your air-conditioned sedan.

On May 27, a federal grand jury indictment was unsealed accusing a group of 12 people, mainly Uzbekistanis along with a company called Giant Labor Solutions, of running a labor trafficking ring in Kansas City, Mo., and its suburbs. If the indictment is to be believed, the scam involved the same sort of debt-bondage tricks that have pushed workers elsewhere into servitude for years.

The way it allegedly worked was this: The Kansas City ring recruited hundreds of workers from Jamaica, the Philippines, and the Dominican Republic with promises of visas through the federal H-2B seasonal worker program. To get the process started, however, the indictment says that workers had to pay the accused racketeers hefty fees.

Once in America, the workers found themselves at the mercy of the traffickers, who allegedly kept "them as modern-day slaves under threat of deportation," in the words of James Gibbons of Immigration and Customs Enforcement. The recruiters apparently took care to keep the workers in debt, charging them fees for uniforms, for transportation, and for rent in overcrowded apartments. Paychecks would frequently show "negative earnings," in the words of the indictment. And if the workers refused to go along with the scheme, the traffickers held the ultimate trump card, the indictment claims: They "threatened to cancel the immigration status" of the workers, rendering them instantly illegal.

So the workers allegedly had no choice but to do as they were bid, cleaning up rooms at some of the best-known hotels in Kansas City and elsewhere -- including Branson, Mo., that symbolic capital of red-state culture.

This is where our story takes a turn from the grotesque and the sordid to the uncomfortably familiar. I have stayed in some of the very hotels that were allegedly cleaned by the victims' barely compensated toil. The office of the main labor leasing firm accused in the indictment of racketeering and visa fraud, Giant Labor Solutions, is located only five or six blocks away from my father's office on a street I have probably driven on hundreds of times in my life.

The Web site of Giant Labor Solutions, still accessible as of yesterday, dazzles with its ordinariness, its stock photos of perky businesspeople and its sultry soundtrack. "Let us worry about your labor needs so you may focus on your business!" it crows. This homage to entrepreneurial zeal is followed by a guarantee that your labor troubles are over, that a Giant Labor work force is a work force that will remain servile and smiling: "Our clients receive happy appreciative employees that will thank you for allowing them the opportunity to work for you."

The days of appreciative servitude are over now, however, and a spokesman for the city's hoteliers told the Kansas City Star that they had nothing to do with the labor recruiter's alleged distasteful practices.

But I suspect this problem won't be brushed off so easily. Hotel chains may denounce their former labor recruiter, but the Web site of the hotel industry's trade association still bellows its support for the federal H-2B visa program that may have made it all possible.

However, according to Ana Avendano, the director of the Immigrant Worker Program at the AFL-CIO, the federal visa program builds worker powerlessness into the equation. When workers sign up with labor recruiters overseas, she told me, they often "have to leave a deed to their house or some other collateral to ensure they don't leave the program." Once here in America, of course, they can't quit, or else they lose their visa status.

It's a recipe for indenture even without the old-school flourishes allegedly added by the Kansas City recruiters. As I was told by the author John Bowe, an authority on modern slave systems, if you import workers without rights equal to ours "of course they're going to get exploited."

What I keep wondering is why we have such a program. Unemployment is over 9% and climbing. Why make it worse?

The answer comes in another choice phrase from the Web site of the accused: Bring on Giant Labor and "your recruiting, hiring and payroll expenses will drastically drop."

It's a "labor solution," all right. It's "a win-win situation," even. For everyone but the workers.

Modern Slavery in America

By Stephen Lendman

(The Intelligence Daily) -- Called human trafficking or forced labor, modern slavery thrives in America, largely below the radar. A 2004 UC Berkeley study cites it mainly in five sectors:

-- prostitution and sex services - 46%;

-- domestic service - 27%;

-- agriculture - 10%;

-- sweatshops or factories - 5%;

-- restaurant and hotel work - 4%; with the remainder coming from:

-- sexual exploitation of children, entertainment, and mail-order brides.

It persists for lack of regulation, work condition monitoring, and a growing demand for cheap labor enabling unscrupulous employers and criminal networks to exploit powerless workers for profit.

The International Labor Organization (ILO) defines forced labor as:

"....all work or service which is exacted from any person under the menace of any penalty and for which said person has not offered himself voluntarily."

Forced child labor is:

"(a) all forms of slavery or practices similar to slavery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labor, including forced or compulsory recruitment of children for use in armed conflict;"

"(b) the use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic performances;"

"(c) the use, procuring or offering of a child for illicit activities, in particular for the production and trafficking of drugs as defined in the relevant international treaties;" and

"(d) work which, by its nature or the circumstances in which it is carried out, is likely to harm the health, safety or morals of children."

The Free the Slaves.net's definition is being "forced to work without pay under threat of violence and unable to walk away." It reports:

-- an estimated 27 million people are enslaved globally, more than at any other time previously;

-- thousands annually trafficked in America in over 90 cities; around 17,000 by some estimates and up to 50,000 according to the CIA, either from abroad or affecting US citizens or residents as forced labor or sexual servitude;

-- the global market value is over $9.5 billion annually, according to Mark Taylor, senior coordinator for the State Department's Office to Monitor;

-- victims are often women and children;

-- the majority are in India and African countries;

-- slavery is illegal but happens "everywhere;"

-- slaves work in agriculture, homes, mines, restaurants, brothels, or wherever traffickers can employ them; they're cheap, plentiful, disposable, and replaceable;

-- "$90 is the average cost of a human slave around the world" compared to the 1850 $40,000 equivalent in today's dollars;

-- common terminology includes debt bondage, bonded labor, attached labor, restavec (or de facto bondage for Haitian children sent to households of strangers), forced labor, indentured servitude, and human trafficking;

-- explosive population growth, mostly to urban centers without safety net or job security protections, facilitates the practice; and

-- government corruption, lack of monitoring, and indifference does as well.

American Anti-Trafficking Efforts

US laws prohibit all forms of human trafficking through statutes created or strengthened by the 2000 Victims of Trafficking and Violence Protection Act (VTVPA) with imprisonment for up to 20 years or longer as well as other penalties.

In April 2003, the Protect Act was passed (Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today Act). The law protects children and severely punishes offenders when enforced. It's to prosecute American citizens and legal permanent residents who travel abroad for purposes of sexually trafficking minors without having to prove prior intent to commit the crime.

The 2000 law (reauthorized in 2005) provides tools to combat trafficking offenders worldwide. It also establishes the Office to Monitor and Combat Trafficking in Persons (TIP Office) and the President's Interagency Task Force to help coordinate anti-trafficking efforts. The State Department's Bureau of Population, Refugees, and Migration (PRM) also is for victim protection. In addition, various other US agencies are involved, including the Department of Health and Human Services (HHS) through its Rescue and Restore Victims of Human Trafficking public awareness campaign and by identifying victims.

The Department of Justice handles prosecutions, and along with DHS and the State Department, addresses various trafficking issues through the interagency Human Smuggling and Trafficking Center. Still, enforcement is often is lax or absent, at both federal and state levels, because offenders are powerful and those harmed are the "wretched of the earth," mostly poor blacks, Latinos and Asians. As a result, the practice is rampant and growing. Below are examples of its forms.

Farmworker Slavery

In a March 2004 report, Oxfam America highlighted the growing problem in a report titled "Like Machines in the Fields: Workers without Rights in American Agriculture." It's a shocking account of how "Behind the shiny, happy images promoted by the fast-food industry with its never-ending commercials, there is another reality:"

-- nearly two million overworked farmworkers living in "sub-poverty misery, without benefits, without the right to overtime," a living wage, or other job protections, including for children;

-- in Florida, it's not uncommon to find instances of workers chained to poles, locked in trucks, physically beaten, and cheated out of pay; it's pervasive enough for a federal prosecutor to have called the state "ground zero for modern-day slavery" in a New Yorker magazine article;

-- John Bowe, author of "Nobodies: Modern American Slave Labor and the Dark Side of the New Global Economy," calls Florida agriculture "an unsavory world" where workers like Adan Ortiz fear talking about their bosses because he has nightmares that they might "come after me with machetes and stuff;"

-- basic US labor laws exclude farmworkers, including the right to organize; laws like the 1935 National Labor Relations Act (NLRB) and 1938 Fair Labor Standards Act (FLSA); also OSHA protections are lacking; the 1983 Migrant and Seasonal Agricultural Worker Protection Act (AWPA or MSPA) provided modest but inadequate relief and none at all when it isn't enforced; Oxfam reported that, except in California to a modest degree, "state laws perpetuate inequality," especially in Florida and North Carolina;

-- overall, enforcement at both federal and state levels is lax and has weakened in recent years; most notable are the lack of investigations, prosecutions, and resources allocated for either; in the case of undocumented workers, nothing in the law protects them;

-- many serve as forced labor against their will in a modern-day version of slavery: terrorized by violent employers, watched by armed guards under conditions of near-incarceration, living overcrowded in "severely inadequate" barracks or trailers, often plagued with rust, mildew, filth, broken appliances, sagging or leaky roofs, non-working showers, and multiple occupants being over-charged up to $200 a week by unscrupulous employers; yet workers put up with it because in the words of one: "If we don't work, we don't eat;"

-- the commercial power of giant buyers and retailers like Wal-Mart (selling 19% of US groceries) and Yum Brands (the world's largest fast-food company) squeeze growers and suppliers for the lowest prices;

-- increased competition from imports have had a similar effect, especially in winter months;

-- yet while wages and prices to producers are squeezed, profits are passed up the distribution chain to corporate giants at the top.

Farmworkers have been punished as a result and are perhaps the poorest and most abused laborers in America. Around half of them earn less than $7500 annually. Lucky ones earn up to $10,000, in either case it's far below the federal poverty threshold, and their wages have been stagnant since the 1970s.

Doing some of the worst and most dangerous jobs in America (from exposure to toxic chemicals and workplace accidents), poverty has forced them into sub-standing housing, temporary jobs, increased migrancy, and family separation.

Besides sub-poverty wages, around 95% get no Social Security, disability, or medical insurance benefits (let alone vacations or pensions) for themselves or their families. Women farmworkers face other abuses like male dominance, sexual harassment, or worse, while at the same time remain primary family caregivers.

Crop and livestock agricultural jobs exist throughout the country, but over half are concentrated in California, Florida, Texas, North Carolina, and Washington. Most farmworkers are young (between 18 - 44 or younger), male (about 80%), and Latino. They have little education, and many are recent undocumented immigrants (mostly from Mexico) forced north because of destructive trade laws like NAFTA.

Organizing efforts have won important victories but not enough to increase workers' bargaining power under a fundamentally unfair system. So while achievements of organizations like the Coalition of Immokalee Workers in Florida (with over 2000 members) are impressive, they're no match against agribusiness giants or Wal-Mart.

Nor can they ameliorate conditions in one of the country's most hazardous occupations. Farmworker disability rates are three times than for the greater population. Around 300,000 laborers suffer pesticide poisoning annually, and many others endure accidents, musculoskeletal, and other type injuries (some chronic).

A 1990 North Carolina study found only 4% of workers had access to drinking water, hand-washing, and toilet facilities, a particularly dangerous situation for children and pregnant women.

Oxfam calls farmworker conditions today the equivalent of a "19th century plantation-style" model relying on field hands, rudimentary equipment, long hours, little pay, no benefits, under a basically "inhumane, anachronistic (system crying) out for reform." But how when all levels of government turn a blind eye to the worst of abuses, and for the undocumented blame them for their own plight.

Domestic Servitude in America

Each year, many thousands, mostly women, arrive in America with temporary visas to work as live-in domestic workers - for the wealthy, foreign diplomats, or other domestic or foreign officials. They come to escape poverty or to earn money to send home to families. Often they're exploited or victimized by unscrupulous traffickers who hold them in forced servitude, work them up to 19 hours a day, keep them practically incarcerated, pay them $100 or less a month, and often subject them to sexual abuse.

Undocumented workers have no protection, but even legal entrants have few. Because visas are employment-based, they're obliged to one employer no matter how abusive, and if leave they lose their immigration status and are deported. As a result, few do or file complaints. Some who do are rarely protected because government agencies are lax in their monitoring and enforcement.

Live-in domestic workers are also excluded from labor law protections with regard to overtime pay and right to organize, strike, and bargain collectively. In addition, they're unprotected by OSHA and against sexual harassment under Title VII workplace safeguards as it applies only to employers with 15 or more workers. In cases of foreign employers, they enjoy diplomatic immunity, even from criminal, civil, or administrative prosecutions.

As a result, special visa domestics endure human rights violations. Employers are immunized while workers are powerless to stop abuses like:

-- assault and battery, including physical beatings and threats of serious harm;

-- limited freedom of movement, including arbitrary and enforced loss of liberty by use of locks, bars, confiscation of passports and travel documents, chains, and threats of retaliation against other family members;

-- health and safety issues, including unhealthy sleeping situations in basements, utility rooms, or other unsatisfactory places; unsafe working conditions endangering health; denial of food or proper nutrition; and refusal to provide medical care and having to work when ill;

-- wage and amount of work concerns - US labor laws afford no protections so long hours, little rest, and low pay are common;

-- privacy invasions - the UN General Assembly's December 1966 International Covenant on Civil and Political Rights (ICCPR) provides that "(n)o one shall be subjected to arbitrary or unlawful interference with his privacy, family, home or correspondence;" it applies to everyone, even live-in domestics on visas; nonetheless violations of ICCPR are common and migrants get no redress;

-- psychological abuse - often highlighting employer superiority and worker inferiority to enforce control and render employees powerless; other abuses include insults, food restrictions, denying proper clothing, and various other demeaning practices; and

-- servitude, forced labor, and trafficking - ICCPR and other international laws and instruments prohibit it, yet don't effectively define "servitude" as distinguished from slavery; as a result, abusive labor relationships are inevitable; trafficking is specifically prohibited under the UN's Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the (UN-adopted 2000) Convention against Transnational Organized Crime; nonetheless, the practice is rampant and growing; in the case of migrant domestic workers, abuse is widespread and greatly underreported.

Sex Slavery in America

It's the largest category of forced labor in America and with good reason:

-- it's tied to organized crime and highly profitable;

-- the demand for sex services, including from children, is high and growing; and

-- the lack of safe and legal migration facilitates it.

The US Department of Justice (DOJ) states that the average entry prostitution age is between 12 - 14. Shared Hope International documents modern-day sex trafficking and examines conditions under which it exists. It confirms that most victims are underage girls. A congressional finding estimated that between 100,000 - 300,000 children are at risk at any time. A DOJ assessment was that pimps control at least 75% of exploited minors by targeting vulnerable children using violence and psychological intimidation to hold them.

The Internet is a frequent recruitment tool. Other vulnerable victims are shelter and street youths, including runaways. An estimated 2.8 million children live on city streets, a third of whom are lured into prostitution within 48 hours of leaving home. Familial prostitution is also common and involves the selling of a family member for drugs, shelter, and/or money.

The market includes prostitution, including with children, pornography, striptease, erotic dancing, and peep shows, often controlled by organized crime. The combination of legal and illegal sex generally is part of a larger portfolio of products and services that include drugs and drugs trafficking.

Sex traffickers usually recruit victims of their own nationality or ethnicity, and migrant smuggling facilitates it. In addition, state and federal laws too often conflict enough to withhold victim status from the abused, impede prosecutions, and result in too lenient sentences when they occur. Also, rarely are prostitution purchasers (including from children) arrested or prosecuted, and overall, law enforcement agencies face legal and systemic challenges that interfere with their ability or inclination to go after buyers. Society provides few protections for victims, including custodial shelters for young children, and as a result, sex services in America thrive.

Sweatshops and Factories

According to the Union of Needle Trades and Industrial Textile Employees, 75% of New York garment factories are sweatshops. The US Department of Labor says over 50% of all US-based ones are, the majority in the apparel centers of New York, California, Dallas, Miami, and Atlanta but others located offshore as well in American territories like Saipan, Guam and American Samoa where merchandise produced is labeled "Made in the USA."

Competing with low-wage offshore producers pressures US producers to cut labor costs to a minimum, even by breaking the law, sometimes egregiously through forced labor. Like agriculture and domestic service, the sector is especially vulnerable as it often operates within the informal economy where regulatory enforcement is lax or absent. As a result, worker exploitation persists. Wages are sub-poverty. Overtime compensation is the exception, and work environments generally are poor to hazardous. Workers who complain or try to organize usually are fired and replaced by more amenable ones.

Starvation wages, long hours, unsafe working conditions, and no protections are standard practice in an industry long known for its labor abuses.

In 1995, two major scandals made headlines, one at home, the other offshore. On August 2, police raided an El Monte, California apartment complex in which 72 undocumented Thai immigrants were kept in forced bondage behind razor wire and a chain link fence. They'd been there for up to 17 years sewing clothes for some of the nation's top manufacturers and retailers.

They were housed in crowded, squalid quarters. Armed guards imposed discipline, pressuring and intimidating them to work every day, around 84 hours a week for 70 cents an hour. Workers were forced to work, eat, sleep, and live in captivity. No unmonitored phone calls or uncensored letters were allowed, and everything bought came only from their captors at highly inflated prices. Seven operators were arrested and later convicted of conspiracy, kidnapping, involuntary servitude, smuggling, and harboring illegal immigrants.

Also in 1995, National Labor Committee investigators found teenage women, as young as 13, sewing clothing for Kathy Lee Gifford's Global Fashion plant in Honduras. Pay was from 9 - 16 cents an hour under oppressive working conditions. Forced overtime was imposed to meet deadlines. Only two daily bathroom visits were allowed. Supervisors and armed guards applied pressure and intimidation to work faster on machines that were rust laden and prone to accidents. Attempts by the women to demand their legal rights were thwarted. Merchandise produced was for major US retailers like Wal-Mart.

American restaurant and hotel workers also work under onerous conditions and are underpaid. In hotels, nearly all housekeepers are women who are required to clean 15 or more rooms a day. Often they must skip meals and rest periods, work off the clock to meet quotas, and have a 40% higher injury rate than service workers overall as a result. According to US Department of Labor figures, they earn an average $8.67 an hour or about $17, 340 annually provided they work full-time.

Immigrants, mainly women, are especially vulnerable in hotels and restaurants. A June 2005 ACLU press release highlighted one example among many pertaining to a law suit brought by two immigrant waitresses against a New Jersey Chinese restaurant charging sex discrimination and labor exploitation.

Filed in June 2003, Mei Ying Liu and Shu Fang Chen charged that from May 2000 - November 2001 they were completely controlled by their employers, forced to work an average 80 hours a week, paid no wages or overtime, had to pay a kickback from tips received, faced gender and ethnic discrimination, were housed in an overcrowded, vermin-filled apartment, and were threatened with death when stopped working at the restaurant.

Guest Worker Trafficking on US Military Bases

Besides Halliburton's exploited army of tens of thousands of foreign nationals in Iraq, Afghanistan and elsewhere, the National Labor Committee (NLC) reported last July that "hundreds of thousands of foreign guest workers - among them 240,000 Bangladeshis - have been trafficked to Kuwait (under false promises of well-paid jobs, and) forced to work seven days a week (11 hours a day) at a US military base" under horrific conditions.

Stripped of their passports on arrival, they're housed in overcrowded, squalid dorms with eight workers sharing small 10 x 10 rooms, paid 14 - 36 cents an hour, beaten and threatened with arrest when they complained, forced to use most of their wages for high-priced food, and the case of "Mr. Sabur" is typical. Hired by the Kuwait Waste Collection and Recycling Company to work at the Pentagon's Camp Arifjan, his job was to clean the base - everything from offices and living spaces to tanks, rocket launchers and missiles.

He worked an 11-hour shift seven days a week and got a one-hour midnight break for supper. For this, he earned $34.72 a week, far less than he was promised, and he had to pay a Bangladesh employment agency 185,000 taka ($2697) for his three-year contracted job. His family sold everything possible for the money, still came up short, and had to borrow the rest from a neighbor.

On the job, the Kuwaiti company illegally withheld his first three months wages, forcing him to borrow money to survive. When he asked to be paid, he was beaten, and after an 80,000 worker strike, he was arrested, incarcerated for five days, beaten in prison, then deported to Bangladesh still wearing his torn, blood-stained clothing.

He was owed but never paid thousands of promised dollars in back wages, and he's typical. NLC estimates that all 240,000 Bangladeshis have been cheated out of $1.2 billion, and the Pentagon is complicit in the crime. These same abuses are common on US bases in Iraq, Afghanistan, and likely other offshore locations as well. In the words of one Sri Lankan laborer for a Halliburton subcontractor in Iraq: "They promised us the moon and stars," but instead gave us dirty work, low pay, long hours, bad food, and for the first three months held us in windowless warehouses near Baghdad's airport with no money, and for some of them afterwards in tents even worse than the warehouses.

A Final Comment

This is the plight of America's vulnerable and those we exploit abroad, whether in restaurants, hotels, agriculture, domestic work, the sex trade, or on US offshore military bases, and seldom do courts provide justice. It's America's dark side along with an appalling record of crimes and abuses, including imperial wars, torture, and looting the national wealth for criminal bankers and the rich at the expense of growing millions in need left wanting at the most perilous economic time in our history. America's long and disturbing legacy, not at all one to be proud of.

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.